Venezuela’s Regional Geopolitics of Oil & The Unsustainability of Petrocaribe

Several articles have recently been tracking Venezuela’s increasing efforts to utilize its energy reserves & expertise to influence politics in Latin America. As Energy Daily points out, Venezuela is helping a Soviet-era oil refinery in Cuba get back online. As the report notes:

“…Chavez is an ardent supporter of improving Cuba’s oil-producing capacity in light of much international speculation about the island’s potential offshore petroleum reserves.

So far, five international oil companies have paid reserve fees to the Cuban government to secure exploration rights there.

According to the U.S. Geological Survey, some 4.6 billion barrels of crude oil and 9.8 trillion cubic feet of natural gas may well be lurking below the ocean floor of the Northern Cuban basin. The reserves are said to possibly rival the estimated reserves in Alaska’s Arctic National Wildlife Refuge….…Several nations are already banking on Cuba’s oil potential. China has invested an estimated $1 billion in Cuba with the intention of exploring its offshore deposits. Last week India’s state-run oil company penned a deal with Cuba to explore off shore as well.

However, as a rather biting article in Commentary Magazine points out, the underlying mechanics of Petrocaribe – the Venezuela-funded energy alliance founded in 2005 – are not sound:

“…Chavez, who sits on top of the world’s largest oil reserves outside the Middle East, was offering energy on easy terms. At present, Venezuela ships almost 100,000 barrels of subsidized oil a day to Cuba. Cuba pays for the oil by stationing thousands of its doctors in Venezuela, where they provide free care for the poor. Chavez, at the summit, wanted to extend the barter arrangement to other nations by accepting local products such as bananas and sugar.

The barter option—“a new mechanism” in the words of Chavez’s Oil Minister Rafael Ramirez—is already available to members of Petrocaribe, the Venezuela-funded energy alliance founded in 2005, but it does not appear to be widely used. That doesn’t mean Chavez’s “brothers” in the region have not been taking advantage of his largesse. In about a year, they have accumulated debts of almost $1.2 billion to Venezuela. Chavez thinks the debt will grow to $4.6 billion by 2010. At present, Petrocaribe members can defer payment of 40 percent of their oil bill and take as long as 25 years to pay Caracas with 1 percent interest when the price of crude exceeds $40 a barrel.

“We have begun to create a new geopolitics of oil that is not at the service of the interests of imperialism and big capitalists,” the Venezuelan leader said yesterday. Unfortunately for him, subsidized arrangements do not last, and that is all Chavez is offering to his neighbors.”

This entry was posted on Sunday, December 30th, 2007 at 4:43 pm and is filed under Cuba, Venezuela.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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